One Employment Agreement Update You May Be Thankful For

You’ve likely noticed a flurry of notifications and emails from companies warning you of updated terms and services. The updates were made to comply with Europe’s new General Data Protection Regulations (GDPR), which has been approved since 2016 and went into effect on May 25, 2018. The relevant portion here generally makes it much harder for a website to throw a 200-page legal document at you with vague terms that allow tracking your personal information and selling to the highest bidder. Those companies that previously used such tactics (seems almost all of them) now are required to be far more transparent with their policies for their EU customers and Americans are getting some residual benefits. It is a little ironic that at roughly the same time this protection goes into effect the United States Supreme Court issued a decision making similar, often hidden, legal waivers in employment handbooks/agreements much stronger.

In Epic Systems Corp. v. Lewis, the Court ruled 5-4 that employers can include a clause in their employment contracts that require employees to arbitrate their disputes individually and to waive the right to resolve those disputes through class actions. This shows the dramatic shift from the judicial system’s view of arbitration 60 years ago. See, e.g., Bernhardt v Polygraphic Co. of Am., 350 U.S. 198, 203 (1956) As made clear in the decision, Congress purposely wanted to dispel American courts’ distaste for arbitrations by passing the Federal Arbitration Act (FAA). While some see Europe’s GDPR as a move forward for the little guy and this ruling as a knockback, the worries are likely overstated.

The National Labor Relations Board (NLRB) has long held that agreements that require employees to resolve their disputes by arbitration on an individual basis are invalid. In fact, the NLRB advocated these agreements as unfair labor practices under Section 8 of the NLRA. The Court in Epic Systems expressly rejected that argument with a harsh dissent from Justice Ginsburg warning that such a ruling greatly undermines employees’ ability to fight back against large companies. Even the majority opinion seemed skeptical of arbitration systems but reluctantly respecting Congressional intent; “this court is not free to substitute its preferred economic policies for those chosen by the people’s representatives.”

It’s certainly understandable to question an employment clause that is estimated to cover about 25 million workers in America. Especially when the Consumer Financial Protection Bureau (CFPB) studied the arbitration agreement clauses, then banned companies from using them with consumers last year, on the belief they stifled legitimate complaints of wrongdoing. That belief is difficult to justify given empirical studies show arbitrations are cheaper for all parties and more available for lower income employees than the courts, more likely to result in a win than if the employee went to court, and presented ease of access to a dispute forum on par with the employee covered by powerful unions.

So while the world collectively laughs at the scramble to update terms of service agreements, now may be a good time to update those employment agreements with the blessing of mighty SCOTUS.

About the Author:

Tyler Freiberger
Associate Attorney
Tyler Freiberger is an associate attorney at Centre Law & Consulting primarily focusing on employment law and litigation. He has successfully litigated employment issues before the EEOC, MSPB, local counties human rights commissions, the United States D.C. District Court, Maryland District Court, and the Eastern District of Virginia.